Stocks in Tokyo fell 1.98 percent to their lowest in nine weeks, hit by a strong yen, a grim global economic outlook and worries over a territorial spat between Japan and China. The benchmark Nikkei 225 index at the Tokyo Stock Exchange lost 173.36 points to 8,596.23, its lowest finish since August 3, while the broader Topix index of all first-section issues was down 1.49 percent, or 10.84 points.

The International Monetary Fund on Tuesday cut its forecast for Japan’s growth this year and 2013, saying a slowdown in disaster reconstruction spending will weigh on the world’s third-largest economy.

In its latest World Economic Outlook, the Washington-based IMF projected that Japan’s economy would grow 2.2 percent and 1.2 percent in 2012 and 2013, respectively, down from its July forecast of 2.4 percent and 1.5 percent.

Sales of Japanese cars in China are in a free-fall. At the China Open last weekend, a representative of Sony Corp., which is a sponsor of the tennis tournament, was loudly booed at the title presentation for the women’s final. Chinese tourists are cancelling trips to Japan in droves. And some analysts say Japan’s economy will shrink in the last three months of the year.

The business and economic shockwaves come after Japan last month nationalized the tiny islands, called Senkaku in Japan and Diaoyu in China, which were already under Tokyo’s control but are also claimed by Beijing. The move set off violent protests in China, and a widespread call to boycott Japanese goods. Toyota and Honda dealerships were burned down in one city.

Seeing footage of Toyota cars getting smashed by angry rioters, Toyota President Akio Toyoda had looked almost tearful, confiding in reporters: “I couldn’t bear to watch. It hurt as though I was getting beaten.”

A report by J P Morgan, released Tuesday, projected Japanese auto exports to China will crash 70 per cent during the October-December period. The export of auto parts will slip by 40 per cent – about the same drop estimated for exports of other consumer products, such as electronics, it said.

The aftermath of the latest phase of the sizzling territorial spat with China will cause Japan’s economy, the world’s third biggest, to shrink 0.8 per cent in the fourth quarter, according to J P Morgan. It had previously forecast no growth in the quarter.

Shayne Heffernan

Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.

Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reached a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.Read the Terms of Service

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